The Value of Being Second

In Paris, our company went head-to-head with Levitt’s and made a solid mark. Eventually, after some troubles with his corporate parent, Levitt had to shut down European operations, leaving us the only game in town. We went on to become Paris’s biggest single-family homebuilder.

Being the second mover isn’t just a matter of timing. The first mover does have some advantages that may be hard to match: technological know-how, access to resources and talent, early market dominance, and name recognition. Each of these, however, can be acquired by a smart second mover. Technological know-how can be learned or surpassed. Even the company considered the final word in microchips, Intel, has ceded some market share to an up-and-coming rival, Advanced Micro Devices. Talent may go to the first mover, but that same talent won’t be happy suppressing their entrepreneurial instincts just to stay employed at a steady first mover. Think of all the Facebook and Google employees who have gone on to start their own companies or join another start-up. A few of my Kaufman and Broad employees went on to become independent homebuilders.

Market dominance and name recognition can be harder to overcome. Sometimes a first mover defines an entire market so well that its name becomes synonymous with the product—such as Tupperware, Coca-Cola, Post-its, or TiVo. Fortunately for the rest of us, such companies are the exception, not the rule, and nothing lasts forever—not even for them. Xerox is a shadow of what it once was. Kodak, which used to be another way of saying snapshot, is now bankrupt. Polaroid suffered the same fate.

As you can see from these examples, a second mover can beat the first mover on branding and market share by relying on an unalterable commercial fact: markets evolve. Tastes and expectations don’t stay the same. Niches grow more numerous, deeper, and, thanks to the Internet, more accessible. A first mover can sometimes fall in love with its product and fail to realize when technology evolves and consumers want something different. This leaves the field wide open for somebody new. The Big Three automakers were all second movers, improving manufacturing methods and offering a better product. General Electric wouldn’t have become one of this country’s largest companies if it had stuck to only manufacturing light bulbs. And Apple, the world’s most valuable tech firm, has been a second mover several times. The company was not the first to sell mp3 players, smartphones, or even personal computers. Apple just did it better than anybody else.

This Book

Eli Broad cofounded and led KB Home, the first homebuilder to be traded on the U.S. and New York stock exchanges, and SunAmerica, which was acquired by AIG for $18 billion in 1999. A noted philanthropist, he established The Broad Foundations, which include the Eli and Edythe Broad Foundation and The Broad Art Foundation, to advance entrepreneurship for the public good in education, science, and the arts. In 2007, Broad received the Carnegie Medal of Philanthropy. The Art of Being Unreasonable: Lessons in Unconventional Thinking is his first book.

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